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Today’s decision by the Norges Bank to leave its policy rate on hold at 1.00% is just a brief pause in its tightening cycle, with another hike now almost certain in June. With core inflation set to remain above target this year, we have a further rate …
9th May 2019
If the ECB re-starts QE next year, as we think is likely, the resulting upward pressure on the Swiss franc would stoke deflationary fears at the Swiss National Bank (SNB) and prompt a policy response. We expect the SNB to step up its currency …
8th May 2019
The increase in industrial production in March is not as a good as it looks at first sight, not least because it was largely due to another increase in construction activity. Moreover, the business surveys such as the manufacturing PMI and Ifo Business …
We expect policymakers in Norway, Switzerland, Iceland, and Sweden to all leave interest rates unchanged at their next policy meetings over the coming weeks and months. In the case of the Norges Bank, we suspect that this will just be a pause in its …
As we expected, the KOF Economic Barometer from Switzerland edged down in April and remained consistent with Swiss GDP growth staying subdued in quarterly terms this year. The sub-50 reading for the manufacturing PMI in April points to a deepening …
3rd May 2019
The rebound in euro-zone GDP growth to a respectable 0.4% q/q in the first quarter of this year has been greeted by many as proof that the economy is back on track. But we suspect that the expansion will slow again in the coming months, given that Q1 was …
The jump in the euro-zone’s core inflation rate in April was largely due to Easter timing effects, and is likely to be reversed in May. We expect the headline rate to fall below 1% towards the end of the year, and core inflation to remain weak. As a …
This morning’s release of inflation data from Switzerland for April yielded no surprises and showed that price pressures remain almost completely absent. We expect the headline rate to fall close to zero over the coming months and that core inflation will …
Negative interest rates in Denmark, Switzerland, and Sweden impose costs on their respective banking sectors, but the overall burdens are very small – well below 0.1% of bank assets in all cases. Accordingly, concerns about these costs will not prevent …
2nd May 2019
A surge in support for populist parties in European parliamentary elections later this month should have little bearing on economic policy in the near term. After all, moderate parties are still likely to control a majority of seats, and parliament’s …
Data due to be released tomorrow are set to show a jump in inflation in April. But given that this rise will largely be the result of Easter timing effects, it is unlikely to be sustained. And while we have raised our end-2019 oil price forecast, and as a …
The manufacturing PMIs from Switzerland and the Nordics for April make for grim reading and suggest that economic conditions have stayed weak at the start of the second quarter. This supports our generally dovish view on policy rates, particularly for …
The official euro-zone activity data for Q1 were much stronger than the message from the business and consumer surveys. But we still think that the consistent weakness of the survey evidence bodes ill for Q2. … Are the euro-zone activity surveys too …
1st May 2019
The first estimate of euro-zone GDP in Q1 and the labour market data for March were encouraging. But the timelier survey indicators have continued to weaken, and we expect the global economy to remain sluggish. So we think that euro-zone growth will slow …
30th April 2019
The decrease in the Swiss KOF Economic Barometer in April leaves it consistent with subdued quarterly GDP growth this year, in line with our forecast. And we expect the franc to appreciate this year, leaving the stage set for further relaxation in policy …
April’s decline in the euro-zone’s Economic Sentiment Indicator adds to the evidence from other surveys that the economy got off to a slow start to Q2. So even if GDP data for Q1, published tomorrow, show a pick-up in growth as we expect, this seems …
29th April 2019
Following this weekend’s election, we suspect that Spain’s next government will tighten fiscal policy slightly, contributing to slower GDP growth over the coming years. But the country still looks set to grow more quickly than the euro-zone as a whole. … …
The dovish shift in the Riksbank’s policy stance this week was a step in the right direction, but we still think that policymakers and investors are overestimating the potential for interest rate hikes in Sweden in the future. Meanwhile, the Riksbank’s …
26th April 2019
Spain’s economy is performing well in the run-up to Sunday’s general election, but we expect growth there to slow. Meanwhile, although we have revised up our oil price forecasts, energy inflation still looks set to drag the headline rate down below 1% …
For now, the Riksbank is in the peculiar position of trying to ease and tighten policy at the same time. But with economic growth and core inflation set to remain subdued, we expect policy tightening to ultimately be kicked down the road. If anything, the …
Spain’s period of very strong growth has come to an end. Nevertheless, the latest data suggest that in the run-up to this weekend’s election, it is growing at a decent pace. And there still appears to be plenty of spare capacity in the economy, which …
The dovish shift in the Riksbank’s policy stance is a step in the right direction. But with economic growth and core inflation set to remain subdued over the coming years, we still think that policymakers and investors are overestimating the potential for …
25th April 2019
We expect that higher oil prices will result in the Norges Bank raising interest rates twice this year and that the krone will outperform its Nordic peers. However, if we are proved correct in our view that the price of oil will fall between now and …
24th April 2019
Whatever government is formed after Spain’s general election, we expect it to implement a moderate fiscal tightening, causing economic growth to slow slightly. But Spain should remain one of the euro-zone’s top performers. The bigger concern is that the …
The fall in the Ifo Business Climate Index for April, which was largely due to a decline in the reading for the manufacturing sector to its lowest level since 2012, is further evidence that Germany’s industrial recession has dragged on into the second …
The Riksbank is all but certain to keep its repo rate unchanged at -0.25% at its policy meeting next week. Meanwhile, coalition negotiations following last week’s election in Finland are likely to drag on into May, but we think that the Social Democrats …
18th April 2019
The reasonably strong run of hard data for the first two months of the year has prompted us to revised up our estimate of Q1 GDP growth to 0.3% q/q. However, the downbeat tone of the business surveys (including the flash PMIs for April) suggests that the …
Weak growth in the euro-zone overshadows near-term prospects in Switzerland and the Nordics. We expect activity to slow in most countries this year and to stay sluggish in 2020. As a result, price pressures should generally remain subdued, prompting …
The disappointing flash PMIs for April suggest that, despite some stronger industrial production data in the first couple of months of this year, the euro-zone is not yet out of the woods. They also indicate that the manufacturing slump in Germany …
GDP growth in the euro-zone is likely to be only slightly stronger this year than in the second half of 2018. Hopes for a sharp rebound in export demand will probably be disappointed, meaning that the manufacturing sector will not turn the corner for a …
17th April 2019
The success of the nationalist Finns Party in yesterday’s parliamentary election is further evidence of the increasing fragmentation in European politics, while the tight result suggests that the process of forming a government in Finland will be even …
15th April 2019
The ECB struck a moderately dovish tone at its policy meeting this week, but with economic growth still fairly slow it will need to follow its words with actions. Meanwhile, industrial production data suggest that Italy’s recession might have come to an …
12th April 2019
Private sector production data for February, released this week, added to the evidence from other indicators that Swedish economic growth slowed sharply at the start of 2019. We think that the Rikbank will have to revise down its forecasts for the repo …
February’s industrial production data suggest that output in the sector performed a little better in Q1 than at the end of last year, but the sector is still struggling. And with global economic growth set to remain weak this year and next, euro-zone …
Swedish inflation data for March, released this morning, lend further support to our view that the Riksbank will keep policy looser for longer than it and investors expect. … Swedish Consumer Prices …
11th April 2019
President Draghi’s comments at today’s press conference suggest that the ECB will announce the terms of the TLTRO-III programme in June, which we suspect will be more generous than previous TLTROs. But we still think the Bank will need to do more to …
10th April 2019
The latest indicators have added to the evidence that economic growth in much of Scandinavia slowed at the start of 2019. Indeed, after strong finishes to 2018, surveys suggest that GDP in Sweden, Denmark, and Finland will have done well to grow at all in …
The pick-up in core inflation pressures in Norway in March suggests that the Norges Bank will stay in tightening mode for now. However, given our forecast for oil prices to fall this year, we think that policymakers will end their tightening cycle sooner …
The latest ECB Bank Lending Survey suggests that economic growth will remain weak. This will probably encourage the ECB to make the terms of its new TLTROs – which are likely to be confirmed in June – very generous. But on their own we doubt that the …
9th April 2019
The weak private sector production data from Sweden for February suggests that the economy is likely to have flat-lined at best in Q1. With core price pressures expected to remain subdued, we continue to expect the Riksbank will leave its repo rate …
8th April 2019
The sharp drop in the manufacturing PMI in Switzerland in March provides the clearest sign yet that the woes in euro-zone industry have spread over the border. Meanwhile, the manufacturing and services PMIs from Sweden for March suggest that GDP growth …
5th April 2019
This week brought more disappointing data for the euro-zone. The ECB is unlikely to respond by loosening policy further at its meeting next Wednesday, but we think that it won’t be long before the Bank is forced into action. … More weak data ahead of …
February’s industrial production data were stronger than expected and suggest that German GDP rose in Q1. But that is largely due to a sharp increase in construction, which is very unlikely to be repeated. The manufacturing sector is still struggling and …
After making some fairly big changes in early March, the ECB will probably be happy to leave things as they are at next week’s meeting. President Draghi will have no choice but to give a downbeat assessment of the economic outlook, which will probably set …
4th April 2019
The account of the ECB’s 7th March monetary policy meeting makes gloomy reading. It confirms that policymakers were worried about downside risks to their growth and inflation forecasts, even though they had only just been revised down, and that they were …
The Swiss economy will not be immune to weak growth in the euro-zone over the coming years, but rising demand from Asia and the increased importance of sectors that are relatively insensitive to the exchange rate will at least cushion the blow. …
We suspect that GDP increased by only 0.1% in the first quarter of this year. The divergence between the manufacturing and services sectors has, if anything, increased, and this in turn has exacerbated the gap in performance between countries. Germany is …
February’s retail sales data suggest that household spending growth picked up a bit in Q1. But the Composite PMI, together with other surveys, suggests that GDP growth might have slowed. … Euro-zone Retail Sales (Feb.) & Final PMIs …
3rd April 2019
The slight pick-up in Swiss inflation in March does not change our view that the headline rate will fall back into negative territory in mid-2019 and that core price pressures will remain extremely weak. … Swiss Consumer Prices …
2nd April 2019
March’s decline in euro-zone headline inflation was largely due to the timing of Easter, so the continued weakness in the manufacturing PMIs will be a bigger worry for the ECB. … Euro-zone Flash HICP (Mar.), Final Mfg PMIs …
1st April 2019
